Your First HMRC Tax Return as a Sole Trader: What to Expect

Tax Queen

Tax Expert @ Pie

6 min read

What to Expect From Your First HMRC Tax Return

Your first HMRC tax return as a new sole trader, freelancer or landlord is an online form where you tell HMRC what you earned in the tax year (6 April to 5 April), what allowable business costs you had, and how much tax you owe. You register first, receive a reference number, gather a year of records, then file online and pay any bill by 31 January after the tax year ends. The first one feels hardest because everything is new, not because the form itself is complicated.

For the wider background, our Self Assessment guide for first-time business owners covers the basics. This article focuses on what actually happens the first time round, so nothing catches you off guard.

What Is a Tax Return When You Have Just Started?

A tax return is a yearly summary you send to HMRC under Self Assessment, the system used when tax isn't taken automatically from your income, as it is through PAYE (Pay As You Earn) on a salary. When you're employed, your employer handles this for you. Once you work for yourself or let out a property, nobody does it on your behalf. The return covers all your income, not just the new business, so a part-time salary, rent and taxable savings interest all go on the same form, and HMRC works out one combined bill.

Do I Need to Do a Tax Return in My First Year?

The key figure is the £1,000 trading allowance, a tax-free amount for small self-employed income. If your gross self-employed income (before expenses) was more than £1,000 in the tax year, you need to register and file. Landlords have a separate £1,000 property allowance, and rental income above it must be reported to HMRC. You might also register below these figures, for example if start-up costs created a loss you could use later, or if you want to pay voluntary National Insurance to protect your State Pension record.

You must register for Self Assessment by 5 October after the end of the tax year in which you started. Our guide on how to register as self-employed with HMRC walks through it. HMRC then posts your Unique Taxpayer Reference (UTR), a 10-digit number you'll quote on every return, and you'll use a Government Gateway login to file online. The letter can take a while, so don't leave registration to the last minute.

Which Forms and Records Your First Return Needs

The main return is the SA100. Self-employed people add self-employment pages: the short SA103S if turnover was under £90,000 and your affairs are simple, or the full SA103F otherwise. Landlords with UK rental income complete the SA105 property pages. Online, you don't pick forms yourself; your answers to the opening questions decide which sections appear.

Before you start, gather a full tax year of records: sales invoices or payment records, bank statements, receipts for costs, rent received and letting agent statements, plus a P60 if you were also employed. Most new sole traders use the cash basis, which simply counts money when it actually comes in and goes out, and has been the default since the 2024-25 tax year. Keep records for at least 5 years after the 31 January filing deadline.

Claiming Allowable Expenses for the First Time

Allowable expenses are costs incurred wholly for your business, such as equipment, software, the business share of your phone and internet, insurance and business travel. They reduce your taxable profit, so first-timers who miss them often overpay. You can claim either your actual expenses or the £1,000 trading allowance, not both, so compare the two. For driving, simplified mileage lets you claim 45p a mile for the first 10,000 business miles and 25p after that; our guide to proving mileage to HMRC explains the records to keep.

How to Do a Tax Return Online for the First Time

Sign in to your HMRC online account with your Government Gateway details and start the return for the right tax year. HMRC asks about your income sources, then opens the sections you need. Enter your turnover and expenses, any rental income and costs, employment figures from your P60, and other income such as interest.

Before submitting, check the tax calculation HMRC shows; it's your clearest view of what you'll owe. Save the submission receipt and reference. Your first return takes longer because you're learning where everything goes, so plan a few relaxed sessions rather than one rushed evening. If you'd like more guidance, you can see how Pie Tax works, from sorting expenses to submitting your return.

Your First Tax Bill and Payments on Account

For 2025-26, most people get a £12,570 Personal Allowance (the amount you can earn tax-free), then pay 20% Income Tax on income up to £50,270 in England, Wales and Northern Ireland; Scotland has its own bands. Self-employed profits also attract Class 4 National Insurance at 6% between £12,570 and £50,270, and 2% above that. Class 2 National Insurance is no longer compulsory, though some people on low profits choose to pay it voluntarily.

The big surprise for many first-timers is payments on account, which are advance payments towards next year's bill. If your bill is over £1,000 and less than 80% of your tax was already taken at source, HMRC asks for half of this year's bill on 31 January and another half on 31 July, on top of what you owe now. So your first January payment can be roughly 150% of one year's tax. Setting aside a share of every payment from day one makes this far easier.

Missing the deadline brings an automatic £100 penalty even if you owe nothing, and our article on rising tax return penalties explains how charges build up.

Tax Return 2026 Dates and Making Tax Digital

Here are the tax return 2026 dates that matter if this is your first one. The 2025-26 tax year ended on 5 April 2026. If you started trading or letting during it, the deadline to register was 5 October 2026. Missed it? Register now. HMRC can charge a penalty for telling them late if tax is still unpaid after 31 January 2027, and your Unique Taxpayer Reference (UTR) can take a couple of weeks to arrive. File on paper by 31 October 2026 or online by 31 January 2027, and pay by 31 January 2027, with any second payment on account due by 31 July 2027. If you started in 2024-25, your first return was due online by 31 January 2026.

Making Tax Digital for Income Tax has applied since 6 April 2026. Sole traders and landlords with qualifying income over £50,000 must now keep digital records and send quarterly updates to HMRC using Making Tax Digital software, and the threshold falls to £30,000 from April 2027. Qualifying income means your combined self-employment and property income before expenses. Our guide to when Making Tax Digital applies to the self-employed explains who's in scope, and keeping digital records now means less to change later.

What to Do Now

If you'd like support with your first return, Pie Tax is self-assessment software for sole traders, landlords and freelancers that pulls in your income, sorts allowable expenses and handles both Self Assessment and Making Tax Digital, taking much of the worry out of a first filing. Here's why sole traders choose Pie Tax. Whatever route you choose, put your deadlines in your calendar today. If you haven't registered yet, do it now: the 5 October deadline has passed, but registering straight away gives your UTR time to arrive before the 31 January 2027 online deadline. Keep business money in a separate account if you can, too.

From there, save receipts as you go and put aside a share of each payment for tax, so January brings no surprises. When you're ready to get your records in order, you can sign in or try it free and build your first return a little at a time.